Hillenbrand (NYSE:HI) Is Paying Out A Dividend Of $0.2225

The board of Hillenbrand, Inc. (NYSE:HI) has announced that it will pay a dividend on the 28th of June, with investors receiving $0.2225 per share. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Hillenbrand

Hillenbrand's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Hillenbrand was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.

Over the next year, EPS is forecast to expand by 164.2%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Hillenbrand Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.78, compared to the most recent full-year payment of $0.89. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 13% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Hillenbrand's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Hillenbrand's payments, as there could be some issues with sustaining them into the future. While Hillenbrand is earning enough to cover the payments, the cash flows are lacking. We don't think Hillenbrand is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Hillenbrand you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.